There is no set definition for what constitutes a small to mid-size enterprise (commonly shortened to SME), but in general, they are businesses with a lower number of employees (under 250 employees usually), revenue, and assets
SMEs have been considered the backbone of developing economies for centuries up until now. Yet, corporations utilizing economies of scale have been eating away the markets making SMEs struggle to find growth opportunities.
Governments and NGOs have done a lot to revitalize SMEs in recent years. But SMEs still face a disadvantage as they lack the skills and funds to build internal digital infrastructure. Thus, SMEs had to compete with better-equipped large corporations for the longest time, and now cloud computing is here to level the playing field.
Smaller in size, bigger in effect
When thinking about the economy, corporations dominating their industries are what comes to mind. Yet, small to mid-size businesses are the real driver of employment and creating value in most countries today.
There are some colossal businesses around the world today, a few of them have passed the $1tn market cap, but they aren’t the only players out there. In most industries, smaller businesses (when put together) make up for a larger market share than corporations.
According to the World Bank, SMEs represent about 90 percent of businesses worldwide, and they contribute more than 40 percent of the GDPs of emerging economies. Data collected by the ILO (International Labor Organization) also shows that SMEs and self-employed workers account for a staggering 70 percent of employment globally, and they account for the majority of job creation.
Governments recognize the dangers of centralization and the loss of revenue to multinational corporations. Thus, they fixate on supporting local SMEs. For example, Saudi Arabia recognizes SMEs as a pillar of its economy, and as a part of its Vision 2030, it aims to grow the SME share of the local GDP to 35 percent by 2030.
Bridging the digital gap
When the digital age started half a century ago, large corporations were the best suited to take advantage of the computing boom. They had the means to tap into main-frame computers and data servers and used that advantage to grow bigger. Meanwhile, SMEs struggled to follow suit.
The disparity in technology deployment caused many SMEs to lose market share for their larger counterparts. Yet, the technology that made SMEs less viable in the past is pushing them forward today.
The introduction of cloud services (ranging from IaaS to SaaS) has helped SMEs grow and stay competitive in recent years. Using the cloud, smaller businesses can now access more complicated tools without investing huge sums of money and workforce.
Big companies have always afforded digitization, as they built, serviced, protected, and upgraded their internal systems for decades now. Yet, SMEs don’t have the luxury of developing their solutions and most of the time can afford no more than a skeleton IT team if any. Thus, the cloud is tempting as it delivers the full benefits of digital transformation without sinking a large initial investment.
Lower costs, higher flexibility
One obvious advantage of smaller businesses migrating to the cloud is simplifying cash flow management, as that eliminates the need to sink the initial investment traditionally required for digital transformation. But cloud adoption has many additional advantages regarding cost savings.
By migrating to cloud services, companies can cut IT and security spending. Additionally, cloud services are more flexible, and thus better suitable for growing companies. For example, most providers offer the pay-as-you-grow model that allows SMEs to only pay for what is currently needed, yet keep the ability to expand cloud usage as they grow.
Standardization can be considered a great advantage of cloud adoption. When digitally transforming, most SMEs copy each other’s approach, using the same SaaS and creating a standard. Standards are especially advantageous for SMEs when they grow and consider acquisition and merger options. It is a known fact: mergers between companies with different work processes seldom go smoothly, while standards ease such transitions.
The new shape of work
When the pandemic hit in 2020, SMEs were hit harder when restrictions and new mandates came into effect. Big corporations were quick to adapt to the new remote work norm, but adaption was harder for SMEs that lacked resources and infrastructure to support remote work. Many smaller businesses had to close shop and many went out of business as a result.
Businesses in similar fields with comparable resources fared differently during the pandemic, and cloud adoption was the main differentiator. SMEs that relied on cloud services found it easier to keep productivity during the harsh months of work restrictions while others scrambled to keep afloat and weather the storm.
Even as restrictions were lifted and work mostly came back to normal, the writing was on the wall: remote work is here to stay. Businesses will have to adapt to the new employment reality, and the cloud is a clear answer for that.
In conclusion, cloud services have been indispensable for SMEs in their fight to regain prominence in the centralizing economies of recent decades. In coming years, SMEs will increase their reliance on the cloud, and even larger corporations are finding it simpler to migrate to the cloud as an opposite for operating internal networks.